2016 (5) TMI 1078 - AT - Service Tax

Rejection of Voluntary Compliance Encouragement Scheme, 2013 (VCES) - VCES was initially accepted - Jurisdictional Commissioner invoking the powers under Section 111 of the Finance Act, 2013 initiated proceedings against the appellant alleging that they have made a substantially false declaration to avail the benefit under VCES. - Held that - what is lacking is that the Department is not able to clearly bring out what are all the construction activities liable to service tax and to whom such services were rendered. The proceedings concluded by the impugned order could not bring out the details of taxable services except to state that the value of services as per P&L account/Income Tax return is much higher than the value of services declared under VCES. Apparently, this assertion by itself will not lead to the conclusion of non-payment of service tax and also to correct quantification of such non-payment, if any. At the same time it has to be noted that the appellants made simply assertions regarding non-taxable services without submitting any supporting evidence. They also claimed various abatements during the material period which requires to be justified with supporting evidence. The matter requires to be re-looked keeping in view the above observations for a fresh decision. - Matter remanded back.

Summary

Issues:
Challenge to jurisdiction of Commissioner to question VCES declaration, Delay in adjudication violating principles of natural justice.

Analysis:
The case involved an appeal against the order of the Commissioner of Central Excise, Udaipur, challenging the initiation of proceedings by the Jurisdictional Commissioner against the appellant for allegedly making a substantially false declaration under the Voluntary Compliance Encouragement Scheme, 2013 (VCES). The appellant had filed a declaration in Form VCES-I admitting a service tax liability of ?5,19,284 for the period 2008-2009 to December 2012, which was accepted by the Competent Authority. However, the Commissioner invoked powers under Section 111 of the Finance Act, 2013, alleging false declaration, resulting in the confirmation of a service tax demand of ?23,60,743 along with penalties. The appellant challenged the order on grounds of jurisdictional overreach and delay in adjudication.

The appellant contended that once the VCES declaration was accepted, no further proceedings should have been initiated against them. They argued that the Commissioner exceeded his jurisdiction by questioning the admitted declaration. Additionally, the appellant raised concerns about a show cause notice issued in December 2014 being adjudicated only in November 2015, which they claimed violated principles of natural justice. The appellant emphasized that they had cooperated during the proceedings and that questioning the order on legal principles was justified.

Upon examination, the Tribunal found that while the appellant had opted for VCES and filed a declaration, the Commissioner raised doubts on the declaration's accuracy under Section 111 of the Finance Act, 2013. The Department collected information from various sources to verify the declaration, including details from service recipients and the Income Tax Department. However, the appellant failed to provide complete details and supporting documents during the proceedings, leading to uncertainties regarding the accuracy of the declaration. The Tribunal noted that the Department did not clearly establish the construction activities liable to service tax and to whom the services were rendered. The appellant's claims of non-taxable services and abatements lacked substantiating evidence, raising doubts on the correctness of the declaration.

Consequently, the Tribunal held that the impugned order was not sustainable in its current form. It directed a re-examination of the case, emphasizing that the appellant should submit all relevant evidence for consideration. The Original Authority was instructed to evaluate the evidence, determine any additional tax liability with reasons, and provide the appellant with a fair opportunity to present their case before a final decision. The appeal was allowed for remand in light of the observations made for a fresh decision.